Question

The Lavender Corporation maintains a general ledger account for each class of inventory, debiting the individual accounts for increases during the period and crediting them for decreases. The transactions that follow are for the Raw Materials inventory account, which is debited for materials purchased and credited for materials requisitioned for use.

1.		An invoice for $8,100, terms f.o.b. destination, was received and entered on January 2, 2018. The receiving report shows that the materials were received on December 28, 2017.
2.		Materials costing $7,300 were returned to the supplier on December 29, 2017, on f.o.b. shipping point terms. The returns were entered into Lavender's general ledger on December 28, even though the returned items did not arrive at the vendor’s office until January 6, 2018.
3.		Materials costing $28,000, shipped f.o.b. destination, were not entered by December 31, 2017, because they were in a railroad car on the company’s siding on that date and had not been unloaded.
4.		An invoice for $7,500, terms f.o.b. shipping point, was received and entered on December 30, 2017. The receiving report shows that the materials were received on January 4, 2018, and the bill of lading shows that they were shipped on January 2, 2018.
5.		Materials costing $19,800 were received on December 30, 2017. No entry was made for them as at that date, because they were ordered with a specified delivery date of no earlier than January 10, 2018.
6.		Materials costing $20,000 were received on December 29, 2017. The supplier’s warehouse was full and the supplier asked Lavender to hold these items on its behalf and has also insured these items for the period that Lavender will be holding them. The purchase terms indicate that the supplier will purchase these items back from Lavender in early January 2018 at $20,000 plus storage fees.
7.		Materials costing $5,500 were received on December 20, 2017, on consignment from DNG Company.

QUESTION: Are there any ethical concerns raised by these transactions? How should Lavender deal with this situation?

Answer 1

Sl No	Particulars	Debit($)	Credit($)
1	materials	8100
	Accounts Payable		8100
	Received Materials on Dec28,2017
2	Accounts Payable	7300
	materials		7300
	Purcease Returns on Dec 29,2017
3	materials	28000
	Accounts Payable		28000
	Received Material not entered by December 31, 2017
4	materials	7500
	Accounts Payable		7500
	received Material on January 4, 2018
5	materials	19800
	Accounts Payable		19800
	received Material on December 30, 2017
6	materials	20000
	Accounts Payable		20000
	received Material on December 29, 2017
7	materials	5500
	Accounts Payable		5500
	received Material on December 20, 2017,